Sunday 29 August 2010 15.19 EDT
First published on Sunday 29 August 2010 15.19 EDT

The government is to introduce a wholesale change to Britain's overseas aid budget by demanding that projects in the developing world must make the "maximum possible contribution" to British national security, according to a leaked Whitehall paper.

Labour, which established the Department for International Development to ensure overseas projects are funded on the basis of a country's needs, warned tonight that Britain's aid budget was being "securitised".

The coalition came under fire after a leaked DfID document showed that the new national security council, which oversees all aspects of foreign policy, is requiring that national security considerations are placed at the heart of aid projects.

The document, which offers guidance to staff of the department overseas who draw up bids for aid, says: "The national security council has said the ODA [official development assistance] budget should make the maximum possible contribution to national security consistent with ODA rules. Although the NSC will not in most cases direct DfID spend in country, we need to be able to make the case for how our work contributes to national security."

Labour said the document marked a return to the days when the old Overseas Development Administration was a division within the Foreign Office. Gareth Thomas, the shadow international development minister, said: "This document is deeply worrying, as it confirms the fears of many in the international development and humanitarian community that the government plans to securitise the aid budget, and weaken its focus in prioritising resources on the poorest people and countries.

"The revelation that part of the aid budget will now be directly controlled by the national security council suggests that other ministers will now be calling the shots on the aid budget instead of the development secretary."

David Cameron decided after the election that all aspects of foreign policy would be overseen by a national security council, to be chaired by the Foreign Office permanent secretary, Sir Peter Ricketts. The change was seen as a victory for William Hague, the foreign secretary, and a defeat for Liam Fox, the defence secretary, because the strategic defence review will be run by the national security council.

Andrew Mitchell, the international development secretary, is relaxed about the NSC's role. Mitchell told the Guardian in January that he wanted to "wire [DfID] in a little bit better into the Whitehall constellation".

The leaked document indicates that national security considerations are likely to be crucial in two sensitive countries that are beneficiaries of increasing amounts of British aid – Afghanistan and Pakistan. It talks of how projects in "fragile states" should focus on peace building and state building.

The document says: "We need to explain how DfID's work in fragile states contributes to national security through 'upstream' prevention that helps to stop potential threats to the UK developing (including work to improve health and education, provide water, build roads, improve governance and security)."

Labour says it agrees that aid should be spent in Afghanistan and Pakistan on improving education to help discourage support for al-Qaida and the Taliban, and that it is right to spend aid on building up structures such as the civil service and the police. But the party fears that aid money may be diverted to help build up the Afghan army.

Thomas said: "It is of course right that our development and national security efforts are complementary and co-ordinated, particularly in countries like Afghanistan, but there is a significant risk that we will see our aid budget increasingly geared to narrow security priorities, instead of meeting the wider needs of the poorest and most vulnerable people."

The aid budget is protected from the forthcoming spending cuts because the government is committed to meeting the UN target of spending 0.7% of national income on aid by 2013. But Mitchell has scrapped a series of commitments in areas such as free healthcare, according to a document leaked to the Left Foot Forward website. In it, the department's director of policy, Nick Dyer, said Mitchell should honour 19 commitments and drop 80.

Thomas said: "It is now becoming clearer why the Tories have abandoned over 80 of our key international commitments – including the pledge to put millions more children into school – as less resources will be available, with money being diverted to security priorities."

A DfID spokesperson said: "A review of all of the UK's bilateral aid is looking at all DFID's programmes, but has yet to reach any conclusions. All DFID funding is and will continue to be governed by internationally agreed definitions of what constitutes aid."

• This article was amended on 31 august 2010. The original defined ODA as Overseas Development Administration. This has been corrected.